Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Daybake here at podcast Good morning.
Speaker 2: It's Tuesday, the fourth of August. I'm Caroline Hepka in London.
Speaker 1: And I'm Stephen Caroline Brussels. Coming up today, HSBC delivers
Speaker 1: results that reward investors faith in Europe's largest bank as
Speaker 1: it ramps up cost cutting plans.
Speaker 2: Satellite images show energy starved countries in Asia going dark
Speaker 2: as tensions over the strait of Homer's Dragon.
Speaker 1: Plus why big ai bets are dividing the business of
Speaker 1: venture capital, leaving smaller funds behind.
Speaker 2: Let's start with the roundup of our top stories.
Speaker 1: HSBC has announced a new one billion dollars share by
Speaker 1: back after reporting second quarter earnings that beat estimates. Pre
Speaker 1: tax profit came in at ten point one billion dollars,
Speaker 1: ahead of the nine point five billion that analysts had expected.
Speaker 1: The bank also raised its cost saving target to two
Speaker 1: billion dollars by the end of this year, as CEO
Speaker 1: jojel Hedri accelerates his overhaul of Europe's largest bank through
Speaker 1: asset sales and simplifying its operations.
Speaker 3: Is what he told Bloomberg this morning.
Speaker 4: We are becoming the stronger bank that we set out
Speaker 4: to build. We're very pleased with what we announced this morning.
Speaker 4: We're growing across all our indicators, or revenue growing, or
Speaker 4: law lawns and deposits are growing, or income is growing.
Speaker 4: We generated returns of nineteen and a half percent on
Speaker 4: tangible equity, so this is you know, this is a
Speaker 4: good demonstration of a.
Speaker 5: Strong business momentum.
Speaker 4: We're also very pleased with the progress we're making on
Speaker 4: the strategy, which we're executing with precision, with discipline and
Speaker 4: at base.
Speaker 3: CEO Jel Hedri speaking there as.
Speaker 1: HSBC shares have touched record highs in recent weeks, recovering
Speaker 1: from a June slump sparked by China's crackdown on cross
Speaker 1: border capital flows.
Speaker 2: Now, the water levels in one of Europe's most important
Speaker 2: rivers are at their lowest point at one hunter in
Speaker 2: fifty years. The Rhine River's navigable depth fell to just
Speaker 2: twenty four centimeters at one key choke point yesterday. Bloomberg's
Speaker 2: energy reporter Avera Brendel says that's the lowest records began
Speaker 2: in eighteen eighty.
Speaker 6: Some memories might come up from the twenty eighteen drought
Speaker 6: and things are looking similarly difficult. But also what is
Speaker 6: important to mention is that like for example, the Rhine
Speaker 6: water level already is almost at the twenty eighteen level,
Speaker 6: but we are just at the beginning of summer. So
Speaker 6: the twenty and eighteen level. Last time that was solo
Speaker 6: happened at the end of summer, and now the summer's
Speaker 6: just getting started.
Speaker 2: Brundell As The extreme weather is also drying up other
Speaker 2: crucial European waterways, including the Danube. As well as disrupting trade,
Speaker 2: the drought is disrupting power generation and creating the conditions
Speaker 2: for massive wildfires.
Speaker 1: US President Donald Trump says Iran has a last chance
Speaker 1: to reach a deal with the United States. Tehran insists
Speaker 1: it's not negotiating directly with Washington, saying it's discussing shipping
Speaker 1: routes through the Strait of Hormoes with Oman instead. Despite
Speaker 1: President Trump's demands, Iran has given no indication it will
Speaker 1: reopen the Strait of Hormus and allow toll free transit.
Speaker 1: Trump says military action is still on the table.
Speaker 6: I want to give them every last shit before decapitation.
Speaker 3: Very tough to do what we have planned.
Speaker 5: Still planned.
Speaker 3: We'll see what happens.
Speaker 1: It's not clear which negotiations President Trump was referring to
Speaker 1: or who is involved. He's repeatedly backed away from threats
Speaker 1: of military escalation in favor of diplomacy, only to see
Speaker 1: those talks collapse.
Speaker 2: Well, all prices are rebounding modestly after yesterday's sharp sell
Speaker 2: lot of US investors way persident Trump's latest ultimatum to
Speaker 2: move on. More than eighty percent of the oil passing
Speaker 2: through the Strait of Hormuz is bound for Asia, where
Speaker 2: the economic impact is becoming increasingly visible. His Bloomberg's James Wilcock.
Speaker 7: A war thousands of miles away is leaving a mark
Speaker 7: on Asia that can be seen from space. Blueberg Economics's
Speaker 7: analysis of NASA satellite imagery found nearly sixty percent of
Speaker 7: the region experience of normal declines in nighttime light after
Speaker 7: the Iran conflict began. The Junes Ces fire brought that
Speaker 7: figure down to fifty four percent, but renewed disruption in
Speaker 7: the Strait up MOOS could quickly reverse that trend, especially
Speaker 7: in fuel dependent economies like Bangladesh, Pakistan, and Cambodia. That
Speaker 7: DILAN was concentrated outside major cities, suggesting high energy costs
Speaker 7: a hitting poorer rural communities the hardest. In London, James
Speaker 7: Orcock Bloomberg Radio.
Speaker 1: The European Union will try to restore unity today at
Speaker 1: a meeting of Home Affairs ministers after Spain's migrant crisis
Speaker 1: exposed to deep divisions within the block. In a letter,
Speaker 1: a YOU commissioned president Versus Vanderline called for a collective
Speaker 1: response after roughly fifty thousand undocumented migrants swam into the
Speaker 1: Spanish enclave Theatare Madrid, says the vast majority of those
Speaker 1: who crossed illegally have now been returned. Boomberg's europe Executive
Speaker 1: outor Chad Thomas, as the issue sparked remarkably public attacks
Speaker 1: on Spain's Prime minister.
Speaker 8: There are many U countries that are on the cusp
Speaker 8: of holding elections and this is a hot button topic,
Speaker 8: and so no leader wants to be seen as the
Speaker 8: one who's not cracking down on any concerns that people
Speaker 8: might have over illegal migration. But most of these people
Speaker 8: have already returned to Morocco, and of course they never
Speaker 8: were actually on the Spanish mainland, they were in this enclave.
Speaker 1: Chad almos was speaking, has several European countries that threaten
Speaker 1: to impose border checks and even to suspend Spain's participation
Speaker 1: in the EU's Free Travel Zone. Today's meeting, Spain is
Speaker 1: expected to demand solidarity from other member states.
Speaker 2: US Treasury Secretary Scott Besson has called on the Federal
Speaker 2: Reserve to expand a facility that Japan can use to
Speaker 2: support the Yes and the Fair Repo. Facility let's foreign
Speaker 2: governments borrow dollars against their holdings of US treasuries. In
Speaker 2: a social media post, Bestin said the Treasury would encourage
Speaker 2: this facility to be upsized. Shasuki Yamada Japan effects and
Speaker 2: rate strategies that Bank of America says the move could help.
Speaker 9: One of the biggest you know, the side effects of
Speaker 9: intervention is that Japan might have to sell a large
Speaker 9: amount of US treasuries and that could destabilize the bond
Speaker 9: market in the US, which could also spill over to
Speaker 9: Japan as well. So I think, you know, this facility
Speaker 9: definitely helps, and yeah, I think Japan can probably.
Speaker 3: Do more than otherwise.
Speaker 2: Bank for America's Shisuki Yamada speaking earlier, economists say that
Speaker 2: Washington's priority is preventing high Japanese bond deals from spilling
Speaker 2: into the thirty one trillion dollar US treasury market. The
Speaker 2: coordinated move also offers a way to keep Tokyo investing
Speaker 2: in America while encouraging the Bank of Japan to keep
Speaker 2: raising interest rates.
Speaker 1: Apple is taking on the UK government. Bloomberg understands the
Speaker 1: iPhone maker is once again challenging attempts to access the
Speaker 1: data of its customers. Are reported too Out of Bio
Speaker 1: has the story.
Speaker 10: Apple has filed a fresh protest against the government's pursuit
Speaker 10: of user data stored in the cloud, according to sources
Speaker 10: close to the matter. It's the latest development in a
Speaker 10: major privacy fight, which kicked off last year when UK
Speaker 10: authorities ordered the tech giant to bypass encryption used to
Speaker 10: secure customer information. Under pressure from US President Donald Trump,
Speaker 10: the government agreed not to seek Americans data, but has
Speaker 10: continued to push for access to UK user communications. A
Speaker 10: UK government spokesperson declined to comment on the specifics of
Speaker 10: the case, but said that the country supports robust privacy protections,
Speaker 10: Whilst Apple confirmed it had filed the legal challenge in
Speaker 10: an email statement, but declined to comment. Further hearing on
Speaker 10: the challenge is scheduled full September in London.
Speaker 2: Do you added Biot Bloomberg Radio. Those are our top
Speaker 2: stories for you. Now let's look at the markets. There
Speaker 2: is tech stock divergence between the US and Asia. Mascish
Speaker 2: Pacific indexes down half of one percent. Very volatile session
Speaker 2: again for the cos B, which currently is down one percent,
Speaker 2: but big intra day swings. The S and P five
Speaker 2: hundred closed near record high. Yesterday the DAS hit a
Speaker 2: fresh record high the stock six hundred dollars to close
Speaker 2: up by four tenths of one percent, So again just
Speaker 2: shy of July's record half to a very positive European
Speaker 2: earning season, HSBC's CEO George Hedri saying he's please with
Speaker 2: progress that the business is making, so that after their
Speaker 2: earnings just this morning, the Japanese yen, after four days
Speaker 2: of gains, is slipping. Despite the intervention that we saw
Speaker 2: that did lead to gains, the Japanese yen is down
Speaker 2: two tenths and brain CREWD futures trade up one and
Speaker 2: a half percent eighty five dollars. Those in the markets.
Speaker 1: In a moment, we'll bring you more on those results
Speaker 1: from HSPC plus YAI is creating a divide in the
Speaker 1: venture capital world. Put another story that we've been reading
Speaker 1: this morning, cows are back in fashion, at least when
Speaker 1: it comes to your breakfast table. Jillian Deutsch has been
Speaker 1: writing about shifting consumer trends around plant based milks. After
Speaker 1: surging sales and the twenty ten seamstoppers are now turning
Speaker 1: away from their almond oat and other alternatives to dairy.
Speaker 1: Sales of these dairy free milks have fallen by more
Speaker 1: than five percent each year for the past three years,
Speaker 1: according to data from Circano. What Cow's milk sales have
Speaker 1: remained steady. So what's behind all of this, Well, it's
Speaker 1: partly people are paying more attention to what's actually in
Speaker 1: these non dairy milk, particularly looking at the additives that
Speaker 1: are in quite a lot of them. Kaw's book also
Speaker 1: appears a little bit simpler in that equation if you're
Speaker 1: looking at those things. It also has more protein, which
Speaker 1: is a very hot nutritional trend. But as also the
Speaker 1: price cos milk's cheaper, particularly in the US, and it
Speaker 1: means that you know, people are perhaps less able or
Speaker 1: less willing to pay the premium for non dairy milks.
Speaker 3: Yeah, I love it.
Speaker 2: This was the classic politicians question, wasn't it. Do you
Speaker 2: know how much a pint of milk or a lead
Speaker 2: of milk costs you? I mean my fridge has a
Speaker 2: number of different milks in it. But yes, I do
Speaker 2: notice that the non dairy versions are about twice as
Speaker 2: expensive as the as the regular milk. But because we
Speaker 2: sit in set offices, Stephen, I know you're a coffee drinker.
Speaker 2: I actually don't know what sort of milk you put
Speaker 2: in your coffee.
Speaker 3: I'm very I just haven't moved away from Go's milk.
Speaker 1: I never got on this trend because everything's cyclical. I'm
Speaker 1: actually back on trend again by simply doing nothing. The
Speaker 1: best way to remain you know, it's I can stop
Speaker 1: to watch is Right twice a day. So that's my
Speaker 1: philosophy for a life. A very interesting and Jillian has
Speaker 1: a great conversation with the CEO of Oakley as well,
Speaker 1: the leading Swedish brand in old milk, and what they're
Speaker 1: doing to try and boost their sales as well after
Speaker 1: seeing decline. So an interesting dell into the world of
Speaker 1: milk from Jillian Deutsche put links that story in our
Speaker 1: podcast show notes.
Speaker 2: Okay, well, let's dig into the results from HSBC, now,
Speaker 2: shall we? With Europe's biggest bang reporting higher profits and
Speaker 2: expected and announcing that it would resume as share buybacks
Speaker 2: the lend of CEO Georgelle Hedries, we're speaking to Bloomberg's
Speaker 2: Frosci Laqua. Here's some of their discussion.
Speaker 4: The results as a whole are demonstrating that we are
Speaker 4: becoming the stronger bank that we set.
Speaker 5: Out to build.
Speaker 4: We're very pleased with what we announced this morning. We're
Speaker 4: growing across all our indicators. Our revenue growing or law
Speaker 4: e loans and deposits are growing, our income is growing.
Speaker 4: We generated returns of nineteen and a half percent on
Speaker 4: tangible equity, so this is, you know, this is a
Speaker 4: good demonstration of a strong business momentum. We're also very
Speaker 4: pleased with the progress we're making on the strategy, which
Speaker 4: we're executing with precision, with discipline and at pace. And
Speaker 4: we've upgraded some of our strategic deliverables, including simplification related saves,
Speaker 4: and just announced three more non strategic exits over the
Speaker 4: last ten days. That's fifteen exits since twenty twenty five,
Speaker 4: and all of this is giving us capacity to invest,
Speaker 4: capacity to accelerate our investment.
Speaker 5: And finally, let me say we're we're you know, we're.
Speaker 4: Very confident in the potential of this bank. We're very
Speaker 4: confident our ability to unlock it. We are now a
Speaker 4: leader and a number of areas where we're operating with,
Speaker 4: you know, the Asian leader in wealth management the world
Speaker 4: to straight bank, and we have structured growth opportunities along
Speaker 4: our footprint, I mean Asian wealth, Asia, by Asia, the
Speaker 4: UK growth opportunities. So we're pleased to put more of
Speaker 4: our strength and the service for out lines.
Speaker 11: I mean, it's impressive because when you privatize Hanks and
Speaker 11: last year you said, look in terms of buybacks will
Speaker 11: probably take a couple of quarters. So what does this
Speaker 11: big buy bank actually tell us about the return generation
Speaker 11: capability of the bank post Hanks And yeah.
Speaker 4: So we're pleased to have resumed buy back this quare
Speaker 4: to three quarters after we announced hanksanging.
Speaker 5: We said at that time that our.
Speaker 4: Priority would be to rebuild capital post privatization. We estimated
Speaker 4: three quarters to be about the time to build that
Speaker 4: three quarters on were able to return excess capital to shareholders. Remember,
Speaker 4: our priority use of capital. First is the dividend payoutratio.
Speaker 4: Second is supporting the organic growth of the business. Organic
Speaker 4: growth with an outer's captite at the right returns within
Speaker 4: our strategic priorities.
Speaker 5: And we're very pleased our loan books have grown.
Speaker 4: I mean, UK has seen consistent growth and we've been
Speaker 4: able to lean in. We're very pleased to see Hong
Speaker 4: Kong finally resume to loan growth.
Speaker 5: So those will be the priority.
Speaker 4: Of course, excess capital priority distribution mechanism has shared buybacks,
Speaker 4: hence the one billion.
Speaker 11: Your head of corporate Investment Bank said you could actually
Speaker 11: become a three hundred billion capitalation bank shortly. I mean
Speaker 11: you're I think by twenty thirty is what he said.
Speaker 11: You're thirty billion away from that. Do you think you
Speaker 11: can become three hundred billion in terms of size and
Speaker 11: like six to twelve months.
Speaker 4: Well, look, I mean we're certainly very pleased with the
Speaker 4: share price reaction to the delivery of our strategy. Where
Speaker 4: this will go as a metaphor shareholders to judge. What
Speaker 4: I'm really focused on is delivering for the business, focused
Speaker 4: on all the growth opportunities that we're driving for the business,
Speaker 4: Delivering the strategy and the simplification at pace, and you know,
Speaker 4: the upgrades we have shown in our capability to do
Speaker 4: so and the speed at which we are able to
Speaker 4: do it safely are our good testament of the capacity
Speaker 4: we're creating to invest even further.
Speaker 5: In the business.
Speaker 11: You've also said that Hong Kong will overtakes Switzerland as
Speaker 11: the world's largest cross border was center by the end
Speaker 11: of the decade.
Speaker 3: Actually it's done so already.
Speaker 11: What does that mean for wealth creation in Asia and
Speaker 11: your story in it?
Speaker 5: Well, yeah, I'm.
Speaker 4: Very pleased to see, you know, Hong Kong again becoming
Speaker 4: this world leader for cross border web management. I mean,
Speaker 4: Hong Kong is a home market for us. We are
Speaker 4: the leader in web management across Asia. We've grown our
Speaker 4: web parances in Hong Kong by ten percent. We're at
Speaker 4: half a trillion dollars. We continue adding clients in Hong Kong,
Speaker 4: six hundred and forty thousand new clients across our two brands,
Speaker 4: the two iconic brands we hold in Hong Kong, HSBC
Speaker 4: and Angsing Bank. So we're very pleased with the momentum
Speaker 4: that Hong Kong and the sophistication that the Hong Kong
Speaker 4: as a platform is creating to be the you know,
Speaker 4: the cross border leader in the world. Remember also, Hong
Speaker 4: Kong is a technology hub. We're seeing a lot of
Speaker 4: investment in Hong Kong in Ai. We will be launching
Speaker 4: very soon the next couple of months stable coin in
Speaker 4: Hong Kong, you know, as you know, as the you know,
Speaker 4: they're leading center for bank issued stable coins within a
Speaker 4: very good regulatory framework. So all good developments. Given our
Speaker 4: presence in Hong.
Speaker 11: Kong for Hanksang, how many more synergies are you expecting
Speaker 11: to come from that?
Speaker 4: Yeah, I mean Hank Sanng synergies. You know, we were
Speaker 4: executing in more than eighty percent of all the synergy workstream.
Speaker 5: So this is going on as per plan.
Speaker 4: We've already announced leadership across most of the infrastructure areas,
Speaker 4: the back office areas, the technology areas, the manufacturing areas.
Speaker 4: This will allow us to create the alignment and the
Speaker 4: synergies that you will achieve. I'll give you one example,
Speaker 4: very telling example in Q two, Hank saying, as of
Speaker 4: May started to use some of the digital onboarding capabilities,
Speaker 4: customer acquisition capabilities that HSBC built. They were able in
Speaker 4: Q two to double the number of clients they onboarded,
Speaker 4: sixty thousand clients on boarding Q two compared to thirty
Speaker 4: thousand Q one. Immediate visible benefit of those synergies.
Speaker 2: So that was the HSBCCO Jeorgel Hedri speaking to Bloombergs
Speaker 2: farc In Laqua after the London headquartered lender reported second
Speaker 2: quarter results. Stay with us more from Bloomberg Day BAQUB
Speaker 2: coming up after this. Well, the rush to AI has
Speaker 2: warped the venture capital market, with money flowing disproportionately to
Speaker 2: a handful of top two investors that back to the
Speaker 2: technology early, and that has left smaller VC funds struggling
Speaker 2: to fundraise. Bella Farr, who leads our team covering find
Speaker 2: Us in the UK, joins us now for more on
Speaker 2: this story, Bell are good to speak to you. Tell
Speaker 2: us more than about the effect that AI is having
Speaker 2: on venture capital. Who are the winners and losers?
Speaker 12: Yeah, So at the end of the day, it's ones
Speaker 12: that can show returns, right, and in the past few years,
Speaker 12: AI has really come to dominate, to dominate all exits.
Speaker 3: You know, five of.
Speaker 12: The biggest exits that we've seen in the last few
Speaker 12: years have been from AI companies. So if you're a
Speaker 12: smaller fund that didn't invest in open AI and Therapic,
Speaker 12: you know, SpaceX investors are really asking, well, can you
Speaker 12: prove returns? And you know, before we agree to invest further,
Speaker 12: we would like to see some exits. We would like
Speaker 12: to see some proof that you can actually give us
Speaker 12: our money back, you know, not just one times over,
Speaker 12: but two, three, four times over. So, you know, smaller
Speaker 12: funds are just having a harder time kind of convincing
Speaker 12: investors to buy on when they haven't been able to
Speaker 12: show you know, the same sort of returns that some
Speaker 12: of the biggest funds that do have access to AI
Speaker 12: that got you know, massive returns on SpaceX for example.
Speaker 12: You know, if they can't prove that sort that those
Speaker 12: same sort of investments, they're having a harder time raising money.
Speaker 1: Is this the same geographical story that we're seeing with
Speaker 1: investments in AI, where because the big players are in
Speaker 1: the US, that is where the money is flowing to
Speaker 1: in the majority of cases, are European funds losing out
Speaker 1: in particular?
Speaker 12: I wonder, yeah, I think that there's definitely a geographical advantage, right,
Speaker 12: but also not only are they just physically closer and
Speaker 12: able to connect with founders and other investors that are
Speaker 12: in AI companies, but they're also able to write bigger checks. Right,
Speaker 12: There's there's just a lot more funding capacity available in
Speaker 12: the US for these AI companies that need so much capital. Right,
Speaker 12: You're not talking about one hundred million dollar check here,
Speaker 12: You're talking you know, in the billions, and you really
Speaker 12: need to be able to have the scale and reach
Speaker 12: and the investors that will back that up.
Speaker 2: Yeah, So what does all of that mean then for
Speaker 2: the startups then and the startups that they're they're funding.
Speaker 12: So if it's taking longer for some of these funds
Speaker 12: to raise money, it's probably going to take longer for
Speaker 12: the startups to actually get them. That's you know, first
Speaker 12: of all, that if a startup needs that a startup
Speaker 12: and that's not in the AI space needs funding, they
Speaker 12: might just have to be a little more impatient. So
Speaker 12: we have reporting that you know, there were firms that
Speaker 12: were raising that were kind of weighing fundraiseres last year
Speaker 12: that those processes have just kind of slowed down or
Speaker 12: the firms are reconsidering, but also investors are really demanding AI.
Speaker 3: So what happens if you're in.
Speaker 12: You know, if you're a food delivery startup that was
Speaker 12: really big in the pandemic, or a financial technology firm
Speaker 12: that you know, raised a whole bunch of money in
Speaker 12: twenty twenty one. I think for those companies, you really
Speaker 12: need to show that you can have scale and you know,
Speaker 12: investors might be more willing to.
Speaker 3: Buy into that.
Speaker 12: Otherwise it's just going to take you a lot longer
Speaker 12: to raise money.
Speaker 3: Thanks for listening to Bloomberg Daybreak Europe.
Speaker 2: If you're enjoying the podcast, give us a follow, leave
Speaker 2: a rating, all review, and maybe send it to that
Speaker 2: one friend or colleague who's always trying to keep up
Speaker 2: with the news.
Speaker 1: And if one podcast today isn't it not for you?
Speaker 1: You can also listen to us live every weekday from
Speaker 1: six am in London on DAB Radio, on tune in
Speaker 1: and on the Bloomberg Business App.
Speaker 2: Oh if you've got a smart speaker nearby, just say
Speaker 2: play Bloomberg Radio